Once you have children, you will always have a great deal of responsibility, whether your children are toddlers or young adults. At first, your responsibility consists of feeding, housing, and clothing your small baby. Then, as your children get older, your responsibilities slowly get more complicated. You must ensure that your kids get a good education, gain key life skills, and grow up to be generally good people. But financial responsibility does not end when your children grow up. Once they reach adulthood, you must still plan financially for your future and theirs. When you get older or in the case of a chronic illness, your children may have to take care of you. This is why financial responsibility and planning is extremely important. To get started, tackle these three areas of your finances first.
Everyone knows that they should plan for retirement, but many people underestimate how much they’ll need or avoid saving money altogether. According to CNN, there are three major sources of income after retirement: Social Security, pensions and annuities, and your savings. You should start by estimating how much you’ll get from Social Security, pensions, and annuities. Then, figure out how much you’ll need for every year after retirement, which is usually 70 percent of your current yearly income. The average lifespan in the U.S. is 81, which means that the average person who retires at 63 will need 18 years’ worth of income for retirement. Social Security, your pensions, and annuities will probably not cover all your expenses. Whatever is left over is up to you to save.
You may think it’s best to put money into your child’s college savings instead of your retirement savings, but if you must choose between them, pick your retirement. Your children will likely have plenty of ways to pay for college, especially if they are good students. However, you will not have any other options to pay for your retirement. You either have the money or you don’t.
Even if you just had a baby and are nowhere close to retiring, long-term care insurance is often overlooked but necessary. If you have a chronic illness or have an accident that requires you to be under constant medical care, it will likely be your children that will foot the bill. No one wants to consider that this could happen to them, but nearly everyone needs long-term care in their lifetime. Planning financially for long-term care can save your children from having to pay for expensive bills or for someone to take care of you.
Additionally, auto insurance is another area where you can save money. You may be able to get a policy at a more affordable rate than what you currently have. Even if you live in an expensive area, you can get a discount if you bundle your policy with other insurance, such as homeowner's insurance. Other ways to save include driving a safe vehicle and not getting any tickets or in an accident.
Estate Planning and Will
While most of us probably plan to be on this earth for quite a while longer, you never know for sure. Even if you’ve just had your first child, you need to ensure that your estate and will are squared away in the case of the unthinkable. With your will, you can dictate who will become your child’s caregiver and whether the money you leave your children will go to their caregiver as well. While this is commonly overlooked, writing a will and making your last wishes known is a part of being a responsible parent. You should also determine who will get what in the case of your death. While doing this, you should determine how much all your assets are worth, including your home. To figure out your home’s value, you can go online and have an estimate generated for you; all you have to do is input your address.
Financial planning is crucial for parents, whether their child is an infant or has kids of their own. Planning ahead can seem confusing and overwhelming. However, by tackling these three things first, you’ll be well on your way to ensuring your child has a safe financial future.
Written by Sara Bailey of www.thewidow.net